In an environment characterized by strong pressure on freight rates, CMA CGM Group, a leading worldwide container shipping group based in Marseille, France, reported a net loss of $100 million in first quarter ended March 31 compared with a net gain of $406 million in the comparable year-ago period.
CMA CGM’s revenue fell 15.3 percent to $3.4 billion for the period, compared to revenue of $4 billion in the first quarter of 2015 when the group benefited from more favorable freight rates and volumes.
Freight volume rose 2.9 percent during the first quarter to 3.2 million Twenty-Foot Equivalent Units, or TEUs, from 3.1 million TEUs. CMA said this beat the market, which grew 1.2 percent margin.
The increase is mainly attributable to growth in the Transatlantic and Transpacific lines operating to and from the U.S., key routes for apparel and textiles, which offset the decrease in volume carried between Asia and Europe, where the group had scaled back its capacity in response to weaker demand.
Average revenue per TEU fell 17.6 percent, a decrease that remains smaller than the average decline in the group’s benchmark indices and reflects the ongoing imbalance between supply and demand, CMA said.
“In a very difficult environment, we have in the first quarter recorded an increase in volumes above the market average, while maintaining a positive core EBIT margin,” said Rodolphe Saadé, vice chairman of CMA CGM. “We will continue our strict financial discipline, including the implementation of a significant cost reduction plan. In addition, we are moving forward on our strategic projects, namely the proposed acquisition of NOL and the creation of a new operational alliance OCEAN with a launching anticipated in April 2017.”
The company said it continued to implement its cost control policy, once again reducing its unit costs in the first three months of the year. This enabled the group to achieve core earnings before interest and taxes of $3 million in the period compared to $400 million in the first quarter of 2015, despite challenging conditions.
CMA CGM said it has initiated a new plan to cut costs by $1 billion within 18 months that will be rolled out this year, but did not provide details. The group said the recent trend on the Asia-Europe and Asia-Mediterranean lines shows a slight improvement in its freight rates this month, but the environment remains fragile.
CMA CGM moved ahead with the proposed acquisition of Neptune Orient Lines of Singapore, and has already received some of the required clearance from the relevant regulatory authorities. The European Commission, as well as Indian authorities, have approved the proposed acquisition. This project will reinforce the group’s leading position in the industry and create major synergies, it noted.
On April 20, CMA CGM said it was forming the Ocean Alliance operational partnership with Cosco Container Lines, Evergreen Lines and Orient Overseas Container Lines. The alliance will boast a fleet of 360 vessels that will operate across 40 shipping lines and will offer high-quality services on major global shipping routes including Asia-Europe, Asia-Mediterranean, Asia-Red Sea, Asia-Middle East, Transpacific, Asia-North America East Coast and Transatlantic. It is expected to be launched in April 2017, following clearance from the regulatory authorities.